…World Bank Chief Economist highlights challenges to economic growth
Much has been said about how rapid technological changes will shape the future of development but Dr Paul Romer the newish World Bank Chief Economist does not buy into the stark future believing that a lot still depends on what policy makers can do to temper the impact of skill-biased automation. In conversation with Jim Kim, the President of the World Bank, at the annual meetings of the Bank, Romer addressed challenges to economic growth and the future of development policy especially as regard technological disruption.
Romer distinguished other forms of economic growth from the one that utilises productive assets to generate scale that reverberates round the economy. “Investment is the key to growth but it goes beyond tinkering with fiscal and monetary policies. It involves everyday concerns like improving the business environment to reducing red tape” he says. Romer stressed the importance of developing human capital which could be achieved through on-the-job skill acquisition.
Uncertainty has made businesses to sit on their hands, which according to Romer is responsible for the subdued growth that has enveloped the developed world. But if the world could decide to advantage of cheap funds to invest in infrastructure, growth would be lifted because of the high returns of infrastructure investment. He however cautions that rapid growth could only be achieved if there is a sustained investment in human capital. “Automation is disrupting low-skill jobs but we have to look at alternative employment opportunities”. The defining question of the moment is how to prepare countries for technological disruption while acknowledging that improving emotional regulation in the work place that helps teams to work more effectively and raise productivity are important for preparing to face the adoption of new technologies.
Preparing for this future will entail reforming education by improving the school system. Early rapid gains come from adequate child nutrition which should be viewed as investment for the long run. It is also important he says to measure what people learn. He says catch-up growth is possible in Africa but the pessimism surrounding the continent’s ability to do that would have to be overcome.
By Osaze Omoragbon